Yahoo Finance Chemist Warehouse speaks out over fears Sigma Healthcare merger will raise prices
The ACCC is currently investigating the proposed merger, which would give the two companies a big market share.
Concerns have been raised about the huge merger between Chemist Warehouse and Sigma Healthcare and what it will mean for Aussies at the checkout.
The nearly $9 billion deal is currently under the microscope of the Australian Competition and Consumer Commission (ACCC), which will release its findings later in the year.
RMIT associate professor of finance Dr Angel Zhong said in an article for The Conversation that it had the potential to “radically reshape the way Australians access medication and other health products”. Whether that’s in a good way or a bad way is up in the air.
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Dr Zhong said mergers like these, which reduced competition in the industry, “typically leads to higher prices for consumers”.
However, Chemist Warehouse has spoken out, saying it will aim to keep prices competitive with other suppliers.
“Chemist Warehouse has built its business and its reputation on providing consumers with convenient access to quality products at the best possible prices,” a spokesperson for the company said in a statement.
“This will not change under the merger.”
The merger will put 600 Chemist Warehouse outlets under the same umbrella as more than 1,200 pharmacies aligned to Sigma. It’s a huge undertaking that would give the newly unified Chemist Warehouse Sigma Healthcare brand a market share of 26 per cent.
Independent pharmacies make up 45 per cent of the market, EBOS Healthcare Australia has 10.5 per cent, Australian Pharmaceutical Industries (API) has 8 per cent and Wesfarmers isn’t far behind on 7.8 per cent.
The rest of the market is made up of Blooms The Chemist, Ramsay Health Care and National Pharmacies.
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Zhong said while the merger might be perfect for the two companies, it could be a “double-edged sword”.
“On the one hand, [mergers] often increase business efficiency, scale and bargaining power,” she said. “These cost savings may translate into lower prices for consumers. In some industries, mergers have reduced prices by more than 5 per cent.
“However, the decrease in competition brought about through a merger can allow companies to get away with charging higher prices, or even lowering the quality of their product offering.”
Submissions to the ACCC about the merger closed this week and the watchdog will now weigh up those responses in its investigation. The ACCC has set a preliminary date for June 13 to hand down its findings.
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